Lonmin CEO Dumbfounded by Strike Duration, Union Boss’s Defiance

May 02, 2014 6:00 pm ET

May 3 (Bloomberg) -- Lonmin Plc’s chief executive officer is surprised by the length of South Africa’s platinum strike and by the unwillingness of the old acquaintance leading the walkout, Joseph Mathunjwa, to accept “economic realities.”

“I thought I knew him very well and I thought this would not go this far,” Ben Magara, 46, said in an interview with Boason Omofaye of Bloomberg TV Africa. “We know each other but I think I am dumbfounded about why the economic realities are not dawning” on Mathunjwa and members of his union.

Magara’s Lonmin, with fellow miners Anglo American Platinum Ltd. and Impala Platinum Holdings Plc, have been at loggerheads with Mathunjwa’s Association of Mineworkers and Construction Union since Jan. 23 when the labor group went on strike over pay. AMCU has rejected the companies’ latest offer of 12,500 rand ($1,190) a month by 2017 including benefits, instead demanding that amount in base pay within four years. That’s double entry-level workers’ current salaries.

“We are close enough to realize that Lonmin belongs to both me and him, his members and my employees and my investors,” said Magara, who has known Mathunjwa since 1999 when he was working at Anglo American Plc’s coal division and the union leader began his labor group at BHP Billiton Plc.

The pair put on a show of unity in August, shaking hands when Lonmin announced that the AMCU had become the majority labor group at the company.

Marikana Killings

Magara, from Zimbabwe, became Lonmin CEO in July 2013, 11 months after 34 protesters were killed by police in a single day near the company’s Marikana operations. Mathunjwa’s AMCU has surged in membership since those events and is now the dominant union in South Africa’s platinum industry.

“The only solution in this thing is for companies to come to the table and talk about how we can reach 12,500 in four years,” Mathunjwa said yesterday in a phone interview. “There is no other way.”

Lonmin, Anglo American Platinum, and Impala have been contacting workers directly, bypassing the AMCU, to ask whether they would accept the new pay offer. The majority who replied to the approach, including by text message, were prepared to, according to Lonmin and Impala, who said the polling may not give an overall picture of workers’ intent.

Law Change

As such, Magara said the government should change the law and require unions to conduct secret ballots before they strike. “The need for a secret ballot for our employees to make a real choice that we can all have evidence, confidentially, that they have chosen to strike or not to strike is important,” he said.

The strike, the longest mining labor stoppage in South Africa’s history, has cost companies almost 16 billion rand in lost revenue and workers 7.1 billion rand in income, according to the producers. Workers don’t get paid when on strike in South Africa, which produces about 70 percent of mined platinum.

“We are doing everything to safeguard the business,” Magara said. “Cash burn, reduce it. Everything else not critical, reduce it.”

Lonmin has declined 8.9 percent to 292.6 pence since the strike began Jan. 23 in London trading. Platinum is down 1.3 percent at $1,439.63 an ounce in the same period.